Financial Conduct Authority  

FCA consults Google on financial promotions

FCA consults Google on financial promotions

The Financial Conduct Authority is working with the likes of Google to intervene on online financial promotions that consumers may find misleading.

Financial Adviser understands the regulator is in contact with tech giants, and has already discussed particular instances where financial promotions and searches had led to consumer or adviser detriment.

The City-watchdog is concerned about promotions that don't properly explain financial risks or total cost. It is also concerned about unclear exit fees or promotions that are vague about the length of time the consumer has signed up for.

Other aspects the FCA is wary of include promotions by companies not authorised or regulated by the FCA itself, such as lead generation sites.

Lead generation sites in the protection space are product comparison websites that collect the data supplied by the consumer and sell the lead on to brokers.

Protection advisers have argued the regulator has done little to halt the impact of these sites however, which they claim are extracting money from the protection industry and constitute financial promotions without proper monitoring.

They argue the sites are costing protection advisers a large chunk of their income through lead-selling but don’t contribute to the financial services world through FCA fees.

According to Alan Lakey, director at Highclere Financial, such firms are a “menace” and the ideal situation would be for lead generation sites to become regulated and pay proper fees, as this would mean the sites “contributed to the problems they themselves had created”.

Alan Knowles, managing director at Cura and chairman of the Protection Distributors Group, said: “I’m pleased to hear the FCA is paying attention to the problem so it’s definitely a start. 

“The question is, will it go far enough? I imagine nothing will happen unless they’re properly regulated.”

Ian Sawyer, commercial director at Assured Futures Ltd, said: “I think it’s been made generally acceptable because nobody is interested in solving the problem.

“But these firms are involved in the sales process. They are performing a regulated activity in a regulated market but are unmonitored.”

Mr Sawyer added protection advisers made a significant amount of their income through commission on the products they set up, but that lead generation sites were chipping away at this income too.

The commission is generally 200 per cent of the premium sold but there is a four-year indemnity period where, if the policy is taken off the books within that time, the insurer can ‘claw-back’ a percentage of the commission originally paid.

But the leads are often sold on numerous times by the lead generation company, meaning the broker’s income becomes ‘clawed back’ by the insurer.

He said: “This also puts insurers at risk from immature businesses spending too much money on leads, only to have the policy cancelled the next year when the same client is marketed to by the same lead generation company on the promise of cheaper premiums — and the cycle goes on.”